Furnishedowner
I am glad that you had a great time in Alaska, it’s on my bucket list. Did you enjoy the long days? We are going to Arizona in September. Did you get to go fishing?
randyscott
Randyscott,
Yes, the Alaska cruise was great. We learned to eat dinner very late because of the long evening sunlight. We were still able to sleep ok in our 'lil dark cabin in the bowels of that big ship, probably also due to our evening wine consumption.
We didn’t go fishing, but went dog mushing which was incredible fun. Also rode the vintage train in Skagway where we saw a 3-legged bear with its cub. In Victoria we visited Butchart Gardens. Next time I would like a close-up glacier visit and to stay longer. We loved Alaska–the water, the islands, Wow!
To answer Nancy’s question on what units to buy–single family houses have just not worked for me. When a SFR (single family residence) goes vacant it is 100% vacant. The cost for taxes, insurance, yard care, water is just too great for that one unit to carry. SFRs should be bought for potential flipping but they are less profitable for furnished long-term rent generation.
The most profitable units are 1-bedrooms.
A single person or couple or adult with child can stay in a 1-bedroom. We put sleeper sofas in every 1-bedroom for just that flexibility. Yesterday we checked in a travel nurse with her teen-age daughter. Daughter can stay up late and watch TV in the living room, working Mom can sleep in bedroom. The best floor plan has the bathroom outside of the bedroom, exactly for that reason.
Where do you get sleeper sofas? My best purchase was 10 hotel suites’ furniture with sleeper sofas and king mattresses, purchased from my local Holiday Inn when they were upgrading. Hotels do this about every 5 years. I just lucked onto that sweet deal. Those sleeper sofas are not worn out, not every guest even uses them.
If I were starting out today, I would buy a 4-plex using FHA financing. I would move into the ugliest, smallest unit and renovate the others one-by-one as quickly as possible. My goal would be to live rent-free, mortgage-free. I would do this while I kept my regular full-time job. The job is necessary in order to qualify for financing.
I would find the best buy and best value in the best area by diligently looking at everything on the market. I would put my own ad in the Penny-Saver Newspaper as well in order to maybe buy directly from an owner. After 90 days I would be the absolute expert on FHA-financible units in my area.
I would make a plan and do it. You potential real estate investors–now IS the time. We have just gone through a value crash. Interest rates are still down. Inventory of house is still high. Rentals are in demand. There may never in the near future be a better time to get hold of some real estate and start leveraging your way to a retirement fortune. Good luck. Just do it.
Furnishedowner
Furnishedowner
More great advice you hit the nail on the head! Currently we have single family houses and one duplex. During the next 3 years we expect to start selling the SFH’s and then 1031 exchange them on Multifamily units and try and find a property manager who understands the furnished rental business. Ten years ago we had poor credit because of a failed business attempt so we started buying rundown houses and completed rehabs, refinanced and then rented them out. Gradually we were able to flip some and buy and hold more. By rehab I mean I did most of the work because if we had to hire a contractor we would have gone broke again and that wasn’t going to happen. Working a full time job we rehabbed about 20 houses in 10 years. We developed the plan and stuck to it. Now we work full time in real estate.
Keep the job if you can banks do not like self employed investors. Equity doesn’t mean as much as that full time job.
Until I get to owning multifamily homes the 3 bd rm houses have been the best for me in my area, because I charge by the bed room. These units are easy to rent. I have one 7 bed 3 bath house that was empty for 5 months last winter, that hurt. We also have a 6 bedroom 2 bath unit that could easily be converted to a duplex, which would make it easier to rent. We have been able to focus on construction companies so the one bedrooms do not work for us. Know your market on what could work the best for you. We expect to make as much on appreciation as we do on rent, the appreciation rates have been running about 15% per year, this is ND.
I would do exactly what furnishedowner said in buying the fourplex and living in the unit while upgrading as much as you can. Less than 6 years ago you could buy a nice 4 plex for about 150-200K now they are pushing 350K+. When I started working in the oil field 6 years ago (near Williston) we had the opportunity to buy a 4 plex for 120K and we opted to buy a house by the lake ( I don’t regret). The four plex would now be making me great profits and it would probably be paid for. Those days are gone but you can still make money. You just have to get over the opportunities lost and find the ones for today. There are quite a few investors out hear that are buying the condo’s furnishing them and renting them and they will net close to what their bills are for the unit. This does allow the small investor a chance to succeed. Keep in mind this is not easy, it is work.
We have a friend that owns a variety shop and he buy’s used military surplus furniture in bulk. The dressers, desks, nightstands and wardrobes are all made of oak veneered plywood and great quality. Granted they are the blonde oak but they can be painted if I have time. At $50 for a dresser, $20 for a nightstand, $100 for a wardrobe you can’t go wrong. These will last for 10 years. We buy new beds at a great price as well.
Good Luck and work hard!
randyscott
Randyscott,
I am so enjoying your posts because for a long time it appeared that I was the only person on this site actively doing furnished rentals.
My formula was and is: Triple your rents. Triple your profit. Okay, also triple your work. But you’ll notice I didn’t say “Triple the number of units.”
Many wise landlords on REI Club have espoused “Get $100/month profit per unit”.
Dang, that meant if it would cost me minimally $2000/month to live and give up my day job I would have to have 20 rental units. That’s a lot of real estate and a lot of work to barely have a living wage. Even if they will all be paid off someday.
That initial studio cottage that I bought 9 years ago had a local market rent of $300-$400 max. Plus I would have had to rent it to LOCALS. This ain’t 'zactly Beverly Hills. Some locals here who would desire to rent low-priced cottages might be in the drug trade, do drive-by’s, routinely trash their rentals, wear pants at half-mast, like pit bulls for house pets, you get the idea.
That was when I decided to furnish it and charge TRIPLE. That eliminates locals. My first tenant was a travel nurse at $900/month and he loved that little cottage.
So I did what you expressed so clearly–
KNOW YOUR MARKET AND WHAT WOULD WORK BEST FOR YOU.
I knew that low-income trashy tenants frustrated and enraged me.
I knew that I had looked for a furnished short-term rental myself when I moved here and ended up staying in a weekly-rate motel.
I had spotted lots of electrical and gas field workers staying long-term in that same motel. I had a big conversation with the motel manager about her frequent, regular, long-term repeat tenants, “Yeah, we get those oil and gas boys alla time. They just wanna set up their BBQ’s outside the doors and cook their steaks. They just work, like their steak and beer, and don’t make no trouble.”
The lights went on. I was getting ready to close on my home and back yard studio cottage purchase. I wanted to steal those good 'ol working boys and give them BBQ’s at those same motel rates.
Your big boarding house houses can work great in a housing-starved area. And yes, SFR’s are easier to sell than multiple units or even duplexes. They work great for rehab, flipping and holding long-term.
So you new investors…study your local markets. What is the average income in your area? What is the vacancy rate in the motels, hotels, and rentals? What businesses are coming? What is booming and what is failing?
Subscribe to and read your local newspapers. Visit the Chamber of Commerce, they have a ton of information. Check the Government Census Web site for statistics on your area.
YOU ARE A BUSINESS. INVEST IN YOURSELF. YOU ARE ALL YOU HAVE. Get the information, make the plan. DO WHAT WOULD WORK BEST FOR YOU AND YOUR AREA.
You can’t do it all, so get your focus and get real good at that one thing. That one thing that you LOVE TO DO.
By invest in yourself, I don’t mean to spend money. Go to the library, it is free and full of books and (my favorite) motivational/educational CD’s that you can play in the car while driving around scoping out real estate.
Then come onto this site with your questions. Get free mentorship by people who have been in the trenches! You can then have your own man-camp, furnished rental business, house-flipping profit, mobile home park, or HUD apartments. It’s all here.
Furnishedowner
Great advice here!! Thank you so much!!! So furnishedowner, after reading your post I went around my area and started looking at houses. There is a great neighborhood close to the most popular shopping mall in the area, a park and walking trail right next to it, all with golf cart access. I live in a tourist area with beaches so it is also within minutes of the beach. We also have a Navy Base here.
I found 2 townhomes for sale in this neighborhood selling for around $136,000 plus HOA. They are 2bed, 2bath, around 1,000 sq. ft. Not sure what the HOA is yet. A rough guess has my payment plus expenses at around $1,300 a month, so estimated rent would be triple this???
My second investigation was looking at condos. My area is LOADED with them. They all seem to rent out during the peak season but these units go for $250,000 and up with HOAs. If you add in a management fee, insurance, well, not sure on about condos. I know several people who own condos and rent them out to the tourists (so of course they are furnished) but they tell me they are lucky if they break even each year after expenses and taxes. Perhaps I would fair better if I did the 30 day rentals? The condos rent long term (3-4 months) in the off season but for much less.
Most people that come to this area want to be on the beach or close to it. I can only think of one townhome/duplex on the beach, the rest are hotels and condos. I have investigated buying houses for long term rental but again, I can’t see how I could charge enough rent to even cover the payment.
There are very few 1 bedroom houses on the beach. There are 1 bedroom condos but very small, about 800 sq ft.
The lower priced homes are in areas that are not desirable or attractive.
I’m not giving up yet, still looking but there must be something that I am missing or misunderstanding here. Do I seem to be on the right investigative track? Thanks for helping a newbie.
Nancy
Nancy
Nancy,
It sounds like you are in a great area…beaches, uummm.
About your questions…
For me 800 sq. ft. is not small. Here that would be a BIG 1-bedroom. Or it would be a 2-bedroom.
Remember, if you are going to be a furnished rental owner landlord, your competition is the HOTELS. What is the size of a studio hotel suite? What does it rent for?
Who are your prospective tenants? Vacationers? Weekenders? That is possible, it is just not what I do. Here I cater to the working middle and upper middle class. Doctors, nurses, engineers, oil field workers, managers. It may take some time to figure out who is filling your units. I started with the idea as well of weekend boarding school parents, vacationers, wedding parties reunions, etc. But I didn’t like paying gross receipts tax on short term stays and it was too much cleaning. Too much in and out. But that can be profitable if you run a very tight turnover schedule with high demand.
Condos–I don’t like the HOA fees (Homeowners Association). There are only a few in our town anyways. I don’t like fees that I can’t control. It is bad enough that I can’t control taxes, insurance and utility fees.
Management–There goes your profit. Try to manage your units yourself, this is an education as well, called “ON-THE-JOB-TRAINING.”
There will probably be some nicer lower-priced units somewhere in your area. If you drive the streets, where are the plumbing trucks parked? Where are the off-duty police cars parked? This is where your working class lives. This is where you can get well-priced housing, not in the luxury areas. Unless you want to be renting to the luxury class.
The nearby Navy Base can really improve the area economics and demand. Where are the Navy officers living? Off base? Those are people who have steady paychecks and need fully-furnished housing.
Good luck. It sounds like you have started on your search. Let us know how it goes.
Furnishedowner
Furnishedowner your comment about the $100 profit per unit made me laugh and thing about my first rental unit. I was so proud of that $100 ten years ago. Over the coarse of the last two years we have converted 8 or our 10 units to furnished units and it can get add up. Now that they are fully furnished, and yes you have to have the GRILL! We did rent a house to a pipe line crew from Mississippi and they were the MASTERS of the Crock pot. I loved going in that house to do any minor repairs.
I strongly agree that the more people pay the better they take care of the property. The last 5 families that I rented to trashed the places, holes in walls, doors and even new windows.
Nancy
The towns houses sound like a good possibility. The individuals with the vacation mentality will kick out good tenants to get the higher rate in the summer months. They could just charge more and keep them longer. Those types of individuals will sit back and complain and not actively seek new tenants. The part of knowing your competition is a VERY important aspect in your case. In my area I know that many construction workers get a per dium of $100 per day or more and my goal is $30 per day per room. Many of your military folks get paid extra to live off base in Minot I think its about $1000 per month. Two Navy guys or gals would love a nice walk to the local beach. In the off season drive by the motels and look for the names of companies on the doors and cold call the company. Your area sounds like it would be great for doctors, professors and other medical types. You may not be able to triple the rents in your area but clearing $1k per month is much better than the $100 per month.
good luck!
randyscott
Housing allowance rates vary both on the location of the base as well as the member’s rank. Here is a link to the 2013 BAH (bachelor’s allowance for housing) rates for the US.
http://images.military.com/media/benefits/pdf/bah-2013-with.pdf
If a person chooses to live off base, they get this amount per month in addition to their base pay and any other special pays. So that being said, a person may have a housing allowance of $1k per month and choose to live in something cheaper or more expensive than that amount.
Hopefully that gives some insight into the rates. Let me know if you have any other questions about it.
Thanks everyone. Great information. I will get busy with more research!!!
Nancy
justin0419,
Thanks for the BAH housing info. That is terrific info.
Nancy, I recommend that you visit the base housing office. They can tell you what is required and what the demand is. If the numbers are right, you can fill your future units with government paychecks. That might be the best cow to be milked, and you won’t be competing with the luxury condo crowd.
Here I just took a drive-by look at another 1-bedroom duplex–asking $75,000. I liked them because they have central air, yards and washer/dryer hookups. I know exactly what all those items cost, having done this so many times with real fixer units. Now I just want to skim off the cream and get those suckers furnished and rented. We are still renovating 3 units, there is high demand, and EVERYONE seems to want 1-bedrooms.
We need to do the verbal conversions on our vacant 2-bedrooms again…they will become “1-bedroom plus den”. And get rented.
Furnishedowner
I just thought of another key aspect of the military housing issue. On base, the rent amount for the military member is exactly what their BAH rate is. This means you’ll likely have a married E-3 living in the same type of house that a married E-6 lives in. They do sometimes have bigger and better houses based on certain ranks. A lot of times the Navy will make the designation E-7 and above meaning E-7/8/9 and all officers can live in that type of house. The BAH amount generally goes up with an increase in rank, but the on base housing will automatically take that pay increase (they consider it a rent increase). So the service member living on base will never see that part of the pay increase for going up in rank. When you’re at a lower rank, base housing can be a really good deal financially. After you rise up the ranks…not so much.
Many military housing has been privatized over the last several years. This has brought on many changes to the system. Used to be that only married active duty service members (or single parents with kids) could live in base housing. Sometimes you had to have a certain number of kids to qualify for certain houses. With the privatizing of housing, the property management companies are given much more latitude of who they can rent to in order to keep occupancy up. At my local base, they just opened it up to regular civilians too. So now because vacancy has risen to a certain level, the property management company can let anyone on the base they want to rent to. The applicants are supposed to pass background checks, but now we’ll have regular people going around our base. Not the wisest idea, but I digress… Our base housing is even starting to charge for utilities if they go above a certain usage level. Base housing used to mean utilities were included no matter how much you used. It still incentivizes people to save energy, but it’s just another way base housing isn’t as good of a financial deal as it used to be.
That’s also why we bought 30 acres of land to build houses on. I’m betting all these changes are going to continue the decline in base housing occupancy. Most of our houses for officers are around 1200-1500 sqft and only have a one car carport. We’re planning on building 1200-1800 sqft homes with two car garages. I’ve run the numbers and I think we can do it and actually charge less rent than what most of the officers would give up in BAH per month to live on base. No, utilities and yard work wouldn’t be included, but the houses would be nicer and bigger.
Hopefully this gives a little more insight into how the system works.
justino419,
Very interesting that you are planning on building private military housing. Providing that base doesn’t get shut down right away, those homes should generate rent for years and run problem-free. I think it is a great plan.
I know in Clovis, New Mexico there is a real housing shortage due to the air base. Rents are much higher than the local economy would warrant without the air base.
Furnishedowner
Amazingly informative information! Thanks.